BoE rejects Neville Richardson's account of Co-op woes

The Bank of England has launched an extraordinary attack on the former chief
executive of Co-op Bank, Neville Richardson, refuting his claims that the
lender’s problems had little to do with its takeover of the Britannia
Building Society.

The Bank of England has said it strongly disagreed with the evidence given to MPs by former Britannia chief executive Neville RichardsonPhoto: DANIEL JONES

Mr Richardson, who led the Britannia before its merger with the Co-op, told MPs that there was “no issue” with the mutual’s assets before his departure in two years ago, blaming the bank’s subsequent loan losses on the new regulatory requirements and the actions of his successors.

In a statement following his appearance in front of the Treasury Select Committee (TSC), a spokesman for the Bank of England said: “We strongly disagree with Neville Richardson’s view regarding the Britannia loan book situation.”

The spokesman added that the Bank of England would stand by the earlier testimony of Andrew Bailey, the UK’s top bank regulator, who had told the Committee the deterioration in the Co-op’s loan book was largely due to portfolios inherited from the Britannia.

The bank said: “The evidence Andrew Bailey gave to the TSC was correct.”

In its 2012 accounts, the Co-op Bank reported impairment losses of £469m, of which £351m came from its “non-core” book. The lender put stated that these loses “largely” represented assets that were formerly held by Britannia.

The Co-op is currently drawing up plans to raise £1.5bn to fill a capital shortfall that has been blamed in part on the legacy of the Britannia deal. The emergency capital raising is likely to see thousands of Co-op Bank bondholders, ranging from pensioners to City hedge funds, forced to accept haircuts on the value of their investments.

Throughout his two hour appearance, Mr Richardson accused senior figures on the board of the Co-op Group and Co-op Bank of failing to heed his warnings about the danger to the business of its ill-fated attempt to restructure itself at the same time as bidding for the 631 branches being sold by Lloyds Banking Group.

Mr Richardson said his decision to leave the Co-op in July 2011 came as his “position became untenable” due to disagreements with Peter Marks, then chief executive of the mutual, Len Wardle, chairman of the Co-op Group, and Paul Flowers, chairman of Co-op Financial Services.

“It was my judgement that putting all these projects together was going to cause a disaster,” he said.

Andrew Tyrie, chairman of the Committee, said he was likely to recall Mr Richardson to give further evidence as part of the TSC’s inquiry into the circumstances surrounding the Co-op’s aborted bid for the Lloyds branches.

The Committee is also expected to offer Mr Bailey a second chance to give evidence, as well as summoning current and senior directors of the Co-op to give their account of the failed deal and the bank’s subsequent problems.

Mr Tyrie said: “There appears to be a yawning gulf between the evidence the Committee heard today from Mr Richardson and the evidence we heard previously from Mr Bailey. The Committee will be investigating this a good deal further."

Pat McFadden MP, a Labour member of the Committee, said it appeared there were “two different versions”.